TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.

While plenty of high-yield opportunities exist, investors must always consider the safety of their dividend and the total return potential of their investment. It is not uncommon for a struggling company to suspend high-yielding dividends which could subsequently result in precipitous share price declines.

TheStreet Ratings' stock rating model views dividends favorably, but not so much that other factors are disregarded. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e. how much one is willing to risk in order to earn profits?; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to its stock's performance.

These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. As always, stock ratings should not be treated as gospel — rather, use them as a starting point for your own research.

The following pages contain our analysis of 3 stocks with substantial yields, that ultimately, we have rated "Hold."

Permian Basin Royalty

Dividend Yield: 9.40%

Permian Basin Royalty

(NYSE:

PBT

) shares currently have a dividend yield of 9.40%.

Permian Basin Royalty Trust, an express trust, holds overriding royalty interests in various oil and gas properties in the United States. The company has a P/E ratio of 6.45.

The average volume for Permian Basin Royalty has been 114,200 shares per day over the past 30 days. Permian Basin Royalty has a market cap of $306.7 million and is part of the energy industry. Shares are down 31.8% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Permian Basin Royalty

as a

hold

. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • PBT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, PBT has a quick ratio of 1.71, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The gross profit margin for PERMIAN BASIN ROYALTY TRUST is currently very high, coming in at 100.00%. PBT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, PBT's net profit margin of 90.36% significantly outperformed against the industry.
  • PERMIAN BASIN ROYALTY TRUST has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, PERMIAN BASIN ROYALTY TRUST increased its bottom line by earning $1.02 versus $0.87 in the prior year.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 53.63%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 64.00% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 64.2% when compared to the same quarter one year ago, falling from $11.70 million to $4.18 million.

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Arbor Realty

Dividend Yield: 9.10%

Arbor Realty

(NYSE:

ABR

) shares currently have a dividend yield of 9.10%.

Arbor Realty Trust, Inc., a specialized real estate finance company, invests in various structured finance investments. The company has a P/E ratio of 3.55.

The average volume for Arbor Realty has been 188,200 shares per day over the past 30 days. Arbor Realty has a market cap of $334.3 million and is part of the real estate industry. Shares are down 3.1% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Arbor Realty

as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.8%. Since the same quarter one year prior, revenues slightly increased by 1.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ARBOR REALTY TRUST INC's return on equity exceeds that of both the industry average and the S&P 500.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, ABR has underperformed the S&P 500 Index, declining 5.21% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Real Estate Investment Trusts (REITs) industry average, but is greater than that of the S&P 500. The net income has decreased by 7.2% when compared to the same quarter one year ago, dropping from $13.36 million to $12.39 million.

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Terra Nitrogen

Dividend Yield: 8.20%

Terra Nitrogen

(NYSE:

TNH

) shares currently have a dividend yield of 8.20%.

Terra Nitrogen Company, L.P. produces nitrogen fertilizer products in the United States. It primarily offers anhydrous ammonia and urea ammonium nitrate solutions for farmers to improve the yield and quality of their crops. Terra Nitrogen GP Inc. serves as the general partner of the company. The company has a P/E ratio of 10.47.

The average volume for Terra Nitrogen has been 19,100 shares per day over the past 30 days. Terra Nitrogen has a market cap of $2.1 billion and is part of the chemicals industry. Shares are up 7.7% year-to-date as of the close of trading on Friday.

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TheStreet Ratings rates

Terra Nitrogen

as a

hold

. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and feeble growth in the company's earnings per share.

Highlights from the ratings report include:

  • TNH has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.06, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for TERRA NITROGEN CO -LP is rather high; currently it is at 67.51%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 64.64% significantly outperformed against the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.6%. Since the same quarter one year prior, revenues slightly dropped by 8.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Chemicals industry average. The net income has decreased by 0.8% when compared to the same quarter one year ago, dropping from $100.10 million to $99.30 million.
  • TNH's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 25.46%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

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